How Do You Develop An Effective Sales Compensation Plan?

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You’ve been hired as the Vice President of Sales for a technology services firm. One of the main reasons you were brought in is the executive team’s frustration with the sales team’s failure to meet revenue goals. Concurrently, the company’s margins have slipped as well.

During your sales team due diligence, you determined that the salespeople have no commitment to their annual revenue goals. Quite frankly, the quotas are meaningless to them.

Plus, the salespeople’s only compensation is salary. There is no commission or bonus upside in the current plan. Given that, the sales team is happy with what they are earning today.

Your assessment is that there is “compensation complacency” on the sales team and that must change immediately if you are to affect revenue and margin. This means that the compensation plan must change.

What steps/process would you go through to develop the right sales compensation strategy for the company?

What would be some key decision points as you design the plan?

How would you communicate the plan change to the sales team?

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